We are upgrading our recommendation on
Nokia Corp.
(
NOK
) to Neutral, solely based on its extremely low current valuation,
which plunged nearly 66% last year. We believe at this stage,
further downslide of the stock price is a remote possibility.
Meanwhile, Nokia remains in dire strait as management has recently
forecasted worse-than-expected financial results for the ensuing
second quarter of 2012 and opted for another 10,000 headcount
reduction.
Nokia is currently in a transition phase from its legacy Symbian
software based mobile feature phones to Windows software based
smartphones and tablets. We believe the main reason for the company
to incur losses is a serious concern relating to the company's
smartphone segment. Though Lumia smartphones are much improved
offerings from Nokia, we are not very sure whether this device will
be able to gain market share from
Apple Inc.
's (
AAPL
) iPhone or
Google Inc.
(
GOOG
) developed Android based smartphones. Continuous loss of global
market share due to lack of popular operating system like Android
or iOS is hurting its profitability.
For the first time in last 14 years, Nokia lost its global
market leadership position in the overall mobile phone industry to
Samsung. Almost a year ago, Nokia lost its crowning glory in the
smartphone segment. We remain very much skeptical regarding
the success of the Nokia-
Microsoft Corp.
(
MSFT
) mobile venture. All the three major credit rating agencies of the
world, e.g., S&P, Moody's, and Fitch have downgraded Nokia to
junk category with a negative outlook.
Nokia has decided to reduce its headcount further by 10,000 by
the end of 2013. The cost-cutting measures will result into $1.26
billion of restructuring charges. However, the company will be able
to save approximately $2 per annum in its core Devices &
Services segment. Moreover, Nokia has decided to sell a majority
stake of its luxury mobile unit Vertu to private equity firm EQT
VI.
APPLE INC (AAPL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
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MICROSOFT CORP (MSFT): Free Stock Analysis
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NOKIA CP-ADR A (NOK): Free Stock Analysis
Report
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